Tuesday 23 July 2013 22.30 EDT
First published on Tuesday 23 July 2013 21.52 EDT

At the height of the recent riot in the asylum seeker detention centre in Nauru, the government of that country dismissed the Nauru police commissioner – Australian federal police officer Richard Britten.

People may be surprised that an Australian was leading the Nauru police force. But the process of warehousing asylum seekers in the small Pacific nation has meant Australian officials have taken up key positions within the country’s administration. Australian personnel head key Nauru government departments in finance, police, utilities and planning.

As Kevin Rudd trumpets his "PNG solution", it's worth thinking about the price Nauru has paid for hosting detention centres. The legitimate focus on the plight of refugees on Nauru has overshadowed the impact of Australian policies on that island nation, a closely integrated society of just 10,000 people.

Most reporting on Nauru ignores Australia’s historic role as the administering power before independence in 1968. In 1993, Nauru and Australia reached an out-of-court settlement when the government of Nauru discontinued its claim for damage to phosphate lands mined while Australia was administering Nauru under a UN trusteeship.

By the end of the 20th century, Nauru’s phosphate boom was over. A country that had never relied on donor aid hit a financial wall just as John Howard was looking for a place to dump asylum seekers beyond the administrative and judicial protections of Australian law.

Australia’s offshore refugee policy had the effect of bailing out the government of then president Rene Harris and delaying urgently needed political and constitutional reforms. Since the Howard government first signed its deal with Harris in September 2001, there have been 11 changes of leadership in Nauru and four states of emergency.

As asylum seekers arrived again in 2012–13, resignations and a sacking left president Sprent Dabwido with just two cabinet ministers and a parliament split into three factions. After months of parliamentary manoeuvres, the president declared a state of emergency on 27 May 2013 and brought forward the election date to 8 June. But the elections have resolved little, and the recent rioting that destroyed much of the detention centre has created new administrative and legal headaches for the new government.

Given Nauru’s desperate economic situation, there is an urgent need to improve essential services in health, water, energy and telecommunications. But since the 1990s, the Australian Agency for International Development (AusAID) and the Asian Development Bank (ADB) have promoted the corporatisation and privatisation of state-owned enterprises in the country.

After 2001, a series of Memoranda of Understanding (MOU) between Australia and Nauru on management of the detention centres set out requirements if the island was to continue to receive aid. These included a study on the privatisation of the state telecommunications authority and an "agreement to implement the preferred option identified through the ADB Technical Assistance on reforming power and water services", as well as the "phased introduction of a broader user-pays system for power services". The 2005 MOU explained that ongoing aid was conditional on "implementation of the public sector reform strategy, resulting in implementation of an affordable scale of salary payments and design of a strategy for a substantial reduction in the size of the Nauru public service".

By 2008, Nauru’s Public Works Department had been disbanded and replaced by a quasi-private sector body operating under a business plan prepared with Australian technical assistance. To address public debt burdens, the Bank of Nauru was wound up. There are no banking services on the island today, limiting private sector activity and making it difficult for ordinary people to save or manage their finances.

With a population of 10,000, there’s limited opportunity for competition between providers – so privatisation means a shift from public monopoly to private monopoly. Even a 2005 ADB research report acknowledges this: "Options for privatising water and electricity services may be meagre, short term and require high returns to cover risk. The country also lacks the capacity to regulate and monitor a private sector monopoly."

AusAID is well aware that the privatisation of public services has placed significant burdens on the Nauruan community. Its annual program performance report 2007-08 noted: "Community resistance to user-pays systems will be difficult to overcome and political will is necessary to pursue this critical element of utilities reform."

A prices regulation act was passed in 2008 to cap prices of some food items, but the arrival of hundreds of asylum seekers, police and camp staff in 2012–2013 has once again disrupted cost structures on the island, with rents soaring, imported food prices affecting nutrition for the unemployed, and renewed pressure on the already limited water supply.

The reform program has been maintained because Australian personnel work as in-line staff. By 2008, all Nauru government expenditure was managed by an Australian in-line finance team in the Nauru ministry of finance. To this day, Australian staff funded by Canberra act as the secretary of finance, economics advisor and budget advisor.

Australian staff also effectively control the management of water and electricity on the island. Canberra funds an Australian as the in-line chief executive officer of utilities to implement Nauru’s utilities strategic plan (prepared with Australian and ADB support), the power station manager and a diesel fitter to refurbish Nauru’s power and water desalination station.

As the "Pacific Solution" expanded in the Howard years, Australia created a police development program (PDP) in Nauru.

From 2005, the Australian Federal Police (AFP) deployed a senior officer in the position of Nauru Police Commissioner. He was later supported by an operations advisor who focused on mentoring and capacity development, and a logistics officer. Australia also funded salaries and costs for a deputy commissioner, manager of corporate support and a finance officer. The 2004 MOU for the deployment of Australian police officers made clear that they are governed by Australian rather than Nauruan law and report to the AFP Commissioner.

The focus of the police program is the staffing and training of the Nauru police force, with the supply of new infrastructure and equipment (by 2011, over $2m was being allocated to the program each year). The AFP also worked to address Nauru’s role as an offshore tax haven, concerned over post-9/11 money laundering.

The AFP has organised riot and disorder training for the Nauru Police Force, who have the responsibility of keeping the peace at Australia's refugee processing centres. In August 2012, as new asylum seekers were to be sent to Nauru by the Gillard government, police were provided with a two-day refresher course in "public order management."

In line with the culture of privatisation, the AFP has also worked with the Nauru police force to hive off protection duties around the camps. In 2012, AusAID reported that the AFP is "providing strategic advice to the ministerial taskforce for successful privatisation of the Nauru Police Force Protection and Guarding Unit, which will result in the separation of 150 personnel".

Policing has been politicised in the small community. Nauru’s police station was burned down on 7 March 2008 by protesters mobilised from former president Rene Harris’ Aiwo constituency. The riots in July 2013 have highlighted the danger of leaving hundreds of young men on the island with little hope of resettlement, under the so-called "no-advantage" rule.

Many Nauruans welcomed the new jobs created as the camps reopened in 2012 but the process has largely benefitted outside contractors. The rushed construction of new facilities in Nauru has been a boon for Australia companies, with initial contracts worth millions to Transfield for running the detention centre, the Salvation Army for community services, Australian corporation Canstruct for construction work, and other contracts for security (Wilson Security), and physical and mental health (International Health and Medical Services).

In late 2012, the Gillard government decided to re-direct $375m from the aid budget towards the cost of processing asylum seeker applications. In a February 2013 report, the Australian Council for International Development (ACFID) detailed significant cuts to Australia’s Official Development Assistance (ODA) program, with humanitarian and emergency programs losing more than $70m. Neighbouring island states saw cuts and deferrals to programs on water, sanitation, education, gender equity and climate change, while Nauru’s aid held steady.

As we head to another election where refugee policy is deeply politicised, we should recall the words of Mohammed Sagar, the last refugee who remained on Nauru in 2007 under "Pacific Solution Mark 1".

I remember when we were on Nauru, when there was an election we were hoping for a Labor party win because they would take over and change things. Labor said there were human rights issues and Australia needed to have sympathy for people in need – but this now just looks like political bullshit.